The Karnataka Authority for Advance Ruling (AAR) has determined that a 12% Goods and Services Tax (GST) is applicable to the rental of residential dwelling units on a monthly basis.
In seeking an advance ruling, the applicant, Deeksha Sanjay posed questions regarding the exemption status under entry No. 12 of Notification No. 12/2017-Central Tax (Rate) and the applicable GST rate if not exempt. The query also extended to whether the applicant could claim Input Tax Credit (ITC) on inputs used for the taxable service.
The applicant justified their request for exemption by highlighting their practice of charging monthly rent tailored to the type of occupancy. Additionally, they impose annual maintenance charges and a refundable security deposit.
The maintenance charges are Rs. 4,000 per annum per person for double and triple sharing and Rs. 6,000 per annum per person for single occupancy, with a refundable security deposit of Rs. 13,000 per person.
The Authority for Advance Rulings clarified that the applicant’s services are to be categorized under SAC 996311, providing accommodation without kitchen facilities and with daily housekeeping services on a single or multi-occupancy basis.
The ruling clarified that such transactions do not qualify for exemption under entry No. 12 of Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017. The applicant, engaged in renting residential properties, sought GST exemption under this entry. The accommodations provided include services beyond mere lodging, encompassing facilities that extend to food, furnishings, maintenance, and security.
The bench, comprising M.P. Ravi Prasad representing the State GST and Kiran Reddy, for Central GST, observed that the renting of residential dwellings, particularly to students and working women, with accompanying amenities such as food, furniture, appliances, cleaning, security, pest control, etc., on a monthly rental basis falls under the GST ambit.
Drawing parallels with services offered by hotels, inns, guest houses, and clubs, it was ruled that the services fall under the 12% GST bracket. Notably, the rent charged per person per unit per day is below Rs. 7,500, aligning with the applicable GST rate of 12%.
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